Monday, May 3, 2010

Council Rules Committee Takes Up Water/Sewer Utility Sale

City Hall beat reporter, Francesca Jarosz, has another good article in today's IndyStar about the progress of the City's sale of the water and sewer utilities to Citizens Energy.

Jarosz says that the issue will be taken up tonight by the Council's Rules and Public Policy Committee, Chaired by Bob Lutz. The meeting begins at 5:30 pm in Room 260 of the City-County Building.

Instead of voting to give the Mayor authority to finalize the sale of the utilities, they will evidently modify Prop 131 to give the Mayor authority to continue moving forward with the deal. The actual Proposal on the actual sale will wait until June when the details have been crafted into a legal document. This is an important move by the Council; keeping alive their role as partners in Government along with the Mayor. They are refusing to rubber stamp a deal the details of which they have not seen. Good for them.

Jarosz writes:

City leaders initially hoped the council would vote on the proposal May 17. They
agreed to move back the timetable after some council members raised concerns about having to vote before the city and Citizens reached a final agreement, which is expected in June.

"It's an overwhelming proposition," said Joanne Sanders, the council's Democratic minority leader, who sent a letter to city officials asking that they allow the council to review the final agreement. "We'll be the ones who will be held accountable, and we have to make sure we do our due diligence in assessing whether this is the best deal for the citizens of Indianapolis."

The Rules Committee will also take up Proposal 132, which calls for increasing the Payment in Lieu of Taxes (PILOT) paid to the City by the sewer utility, floating bonds to the tune of $189 million backed by those PILOT payments, and floating bond anticipation notes to the tune of $189 million to be repaid by the bond proceeds within 5 years.

I am concerned about how dedicated these funds will be and what will prohibit the funds from being spent on things other than infrastructure.

While the digest of the Proposal says:

authorizes the issuance and sale of revenue bonds to procure funds to be applied to the costs of the construction, renovation, rehabilitation and installation of improvements to the public ways, including roads, streets, alleys, trails, sidewalks and other public facilities, appropriating the proceeds derived from the sale of such bonds, modifying the amount of payments in lieu of taxes payable by the sanitary district

The ordinance itself only says:

SECTION 29. All PILOT received by the City shall be deposited in the consolidated county fund and used for any purpose that the consolidated county fund may be used.
Throughout the Ordinance, there are references to "the Project", but nowhere can I find "the Project" defined. If the funds are not legally limited in how they can be spent, then, any and all normal expenses of the consolidated county fund would qualify. The sale of the utilities is being sold to the public as a way to fix our worn streets, sidewalks, and bridges. The ordinance needs to be as specific and ink down this promise. I remind everyone how former Mayor Bart Peterson raised the County Option Income Tax and promised that $5 million of it would go to crime prevention grants. When the Council and Mayor's office changed to Republican hands, that promise went out the window.

Melissa Thompson, Clerk of the Council, did send me the Resolution referred to in Prop 132. The "Project" is defined in the Public Works Board Resolution 21-2010 as follows (this gets a bit long, but it is worth public review):

Accessible Infrastructure

The City of Indianapolis estimates that as many as 26,000 ADA ramps may be missing and need to be installed throughout the city. The estimated coat to install these missing ramps is $40 million dollars.


Indianapolis has approximately 476 miles of alleys that provide access to adjacent residents, utilities, solid waste collection, as well as the general public. DPW staff estimates that as many as 50 percent of these alleys are below fair condition. The estimated cost to upgrade these alleys to fair condition is $65 million dollars. Our initial need is estimated to cost $39 million dollars. The alley segments in our inventory will be prioritized throughout the city by DPW staff working with the city county councilors.

Bike Lanes

The City of Indianapolis has developed a bicycle plan for the installation of over 230 miles of on-street bicycle lanes and share the road segments to be incorporated over the next 15 years. The estimated cost to construct these bike lanes is $94 million dollars.


Of the 531 bridges that are currently under Marion County' jurisdiction, approximately 151 of them are currently need some sort of the rehabilitations and approximately 110 of them are currently recommended for replacement. The estimated cost to replace and rehabilitate these bridges is estimated at $291 million dollars. Our initial need is estimated to cost $63.5 million dollars.

Curb and Sidewalk Reconstruction

DPW estimates that the City of Indianapolis currently has 2,966 miles of sidewalk in our public transportation network. DPW's sidewalk inventory which is a part of our pavement management inventory (updated in 2000) estimates 447 miles of our sidewalk's existing condition is less than fair. The estimated cost to reconstruct this existing sidewalk is $186 million. Our initial need is estimated to cost $52 million dollars. The street segments in our inventory will be prioritized throughout the city by DPW staff working with the city county councilors.

Curb and Sidewalk Missing Segments

The City of Indianapolis has 3,193 miles of streets in our transportation network. DPW estimates that 824 miles of thoroughfares and 862 miles of residential streets in this inventory currently do not have sidewalks. DPW estimates that installing the 1,686 miles of missing sidewalk will cost $702 million dollars not including the cost of drainage and additional right of way. Our initial need is estimated to cost $38 million dollars. The street segments in our initial inventory will be prioritized throughout the city by DPW staff looking for segments without extensive drainage and existing right of way and working with the city county councilors

Intersection Improvements

DPW maintains a priority rating of intersection improvements that will improve traffic flow and/or improve vehicular safety. Currently 18 of these intersections have had a traffic signal warrants analysis prepared indicating that a new traffic signal is warranted and some of these have had ordinances approved by the City County Council to install a new traffic signal DPW currently estimates that the cost to construct these 18 intersections is $14 million dollars. The intersection improvements will be prioritized throughout the city by DPW staff looking for segments without extensive drainage and existing right of way and working with the city county councilors

Monument Circle

With the upcoming Super Bowl in February 2012 there is an immediate need to implement a short term repair of the Monument Circle and its spokes. DPW estimates that the cost to rehabilitate all of the driving and walking surfaces with this area at $2 million dollars.


The City of Indianapolis maintains 7,302 lane miles of pavement. DPW's pavement inventory estimates that 1,058 lane miles of pavement's condition (thoroughfares, and residential streets) is less than fair and is in the need of resurfacing or more extensive repairs. The estimated cost to resurface the street segments identified to be in less than a fair condition is $238 million dollars. The street segments in our inventory will be prioritized throughout the city by DPW staff working with the city county councilors.

Traffic Signal Operations

Of the 1100 traffic signals that are under Marion County's jurisdiction approximately 750 of them are currently or have been connected to some type of coordinated system. DPW estimates that the cost to repair the traffic signal system network and perform the necessary data collection and analysis to optimize our traffic signal network at $5 million dollars.

I do not know if a tangential reference to the Public Works Board Resolution can result in limiting number of ways the bond and BAN proceeds can be spent and in effect dedicate those funds. The dollar costs listed in the Resolution add up to $585.5 million. So, even if the Resolution legally does limit the ways that the money can be spent, there still is a lot of wiggle room for spending $189 million in money (less the expense related to floating the BANs and bonds) on $585.5 million in needs.

Hopefully, the Council committee will cinch down the legal issues of dedicating these funds tonight. But, the risk that the City's taxpayers could have to pay back $189 million plus interest on bond anticipation notes, should the IURC deny the rate increase, makes me very nervous.


Marycatherine Barton said...

As well, we should all be nervous. Thank you for this well-researched and noted valuable report, HEI.

Citizen Kane said...

So, without the Super Bowl, there would not be a need to do anything with Monument Circle? This is the first that I have heard of any need.

Again, mark my words, the Super Bowl will cost taxpayers ten of millions of dollars when it is all said and done (and due to a a potential strike/lockout, it may not even be played). There are so many unknown hidden costs that the city is incurring daily, despite there being no Super Bowl line item in the budget.

And as for the transfer deal, no money should exchange hands. This should just be a transfer of services. There should be no increase in PILOT funds because it involves a transfer of non-taxable public infrastructure to an public entity that is basically owned by the city. See below:

History of the Trust

Citizens Energy Group was founded in 1887 as Consumers Gas Trust at a time when the city began to use natural gas drawn from nearby gas production fields. City leaders such as Thomas Morris, Colonel Eli Lilly and Benjamin Harrison created a structure known as a Public Charitable Trust to protect the gas company assets from takeover by monopolies like Standard Oil and from political patronage. Consumers Gas Trust became Citizens Gas in 1906 when the city purchased the majority of the company’s assets. It became Citizens Gas & Coke Utility in 1935 when the City purchased all of the company’s assets. In 2008, the company was renamed Citizens Energy Group to reflect recent strategic changes in the company including closure of Indianapolis Coke. As long as it fulfills its mission, Citizens cannot be sold. The legal operating name for the Trust is The Board of Directors for Utilities of the Department of Public Utilities of the City of Indianapolis (“The Board”).